GLP’s non-action:Implications for SGX’s bid for ASX & S’pore Inc

Global Logistics Properties has replied to a hack’s rant on why it should have disclosed GLP’s non-compete agreement with ProLogis in China and Japan in its prospectus. The GIC-linked company, which listed on SGX in October continues to contend that the “existence of the non-competition arrangement between the company and ProLogis is not material, and continues to be non-material to the ongoing business of the company”. The quote is from its reply to BT who first exposed this agreement.

I won’t go into the legal issues involved except to say but I find the reply inconsistent. BTW the links to the reply and rant may go walkabout in a few days’ time.

But what will SGX do? If it does nothing (putting the onus on the central bank: MAS approve prospectus leh), or investigates and then clears GLP, it will fuel Ozzies suspicions of the SGX takeover of ASX for two reasons.

One is the suspicion that ASX’s very high standards (even BT concedes this) will be diluted by SGX’s “perceived” laxer standards. The problems of S-Chips will be cited, unfairly says BT, though no-one can argue that most S-Chips have turned out to be sick dogs with fleas.

The incident will also reinforce the view (remembering MM is chairman of GIC) that cos linked to MM are always guilty of sumething until proven innocent. Witness this recent rant

And about the only possible reason the Singapore exchange is more highly valued than the ASX is because of the controlling stake held by the Singapore government, which translates to control by the Lee dynasty.

The Singapore government’s investment arm, Temasek, owns 25 per cent of the Singapore Stock Exchange and would end up with 14 per cent of the combined entity.

Temasek is headed by Ho Ching, wife of Singapore’s Prime Minister, Lee Hsien Loong. He is the son of former prime minister Lee Kuan Yew. On those grounds alone, the arrangement should be rejected.

(Shades of Dr Chee, or the late JBJ speaking)

So GLP may have done SGX a disservice. This may taint other companies linked to GIC, or the government e.g.Temasek and its TLCs and the Acsendas gp, when they do biz in Oz or elsewhere.

And since I’m on SGX’s takeover by ASX, I was sometime back reading an article from the Australian on how it sees the deal progressing. The headline says it all: Political odds stacked against ASX merger.

Two bits of its analysis are worrying, one for SGX shareholders, and the other for the powers-that-be of S’pore Inc.

For the ASX, however, the priority was getting the highest financial equation on the table first and worrying about the political equation second. In terms of money, this approach worked well. The $8.4 billion offer from Singapore Exchange was at a 37 per cent premium to the last trade share price of ASX on October 22. The political equation is not so neatly calculated.

Certainly Canberra is going to reject any notion that a good deal for ASX shareholders implies a good deal for the country. It will only be more suspicious that self-interest, rather than national interest, is driving the deal.

Shows that the ASX mgt egged on by its controlling shareholders (Oz brokers) may have conned SGX into thinking that the political issues could be overcome. If the takeover fails, SGX mgt will be shown to be a bunch of fools. In addition, SGX will lose money, not only on the professional fees but on the fees it has to pay to have credit facilities on stand-by.

More likely will be an outcome where FIRB suggests conditions while the government hardens those up and adds to them. This would avoid the political embarrassment of outright rejection undercutting the government’s credibility while turning the focus on Singapore’s willingness to compromise. It’s the ultimate political bet on the market.

Err what happens if the Ozzies insist that the links between SGX and S’pore Inc be broken as the price of the deal? Other than Temasek’s non-voting stake in SGX, the head of regulation at SGX was from Temasek and the central bank, while the ex-CEO of SGX is now president and an executive director of Temasek. The chairman of SGX is the ex-CEO of SIA. MM said of SIA, “We own it”, when asked in 2004 why he personally involved himself in a mgt dispute with the pilots.

“Wheels within wheels,” a jackaroo or even a squire from the Outback may conclude. A rabid Ozzie First surely would.

SGX and S’pore Inc will have problems. Accede and some efficiencies will be lost. Refuse, and allow tongues to wag that more than commercial interests are at stake in deals involving GLCs and TLCs.